Suncorp Pulls In The Sale Sign
The Age
Wednesday October 15, 2008
SUNCORP-METWAY'S banking arm is believed to have deliberately slowed the pace of lending over the past two months to preserve cash and reduce reliance on wholesale markets.
The revelation came as Suncorp yesterday said it had abandoned talks to sell its banking and wealth management business, opting to hold out for a better price after the Government guaranteed banks' deposits and wholesale fund raising.After days of talks with three of the nation's biggest banks, Suncorp yesterday said it was unlikely to receive offers "reflecting the operational or strategic value" of the assets.Analysts including brokerage Citigroup had estimated the assets might together fetch up to $6 billion.In the past week, Suncorp received separate approaches from Commonwealth Bank, ANZ and National Australia Bank for its banking operations and decided to test the market through a formal sales process.But CBA and NAB opted not to lodge a formal offer for Suncorp on Friday as global markets dived. ANZ was the sole bidder, but with a low-end $3billion offer.While the latest talks have been discontinued, Suncorp's board remains open to a sale and is prepared to consider revised offers for the business, which is the nation's sixth biggest bank.Suncorp "is willing to re-engage with those parties who have, in the past, expressed strong strategic interest in these assets and is open to proposals that are realistic and offer fair value to our shareholders", chairman John Story said yesterday.Investors have been pushing for a break-up of Suncorp's assets, with many expressing frustration that the company's hybrid banking and insurance model is responsible for its shares trading at a discount.After initially losing ground yesterday, Suncorp shares eventually recovered to close up 1.1% at $9.15.Ratings agency Fitch yesterday said the Australian Government's move to shore up banks' defences against the global credit crisis, including guaranteeing deposits and wholesale funding, was a positive for the sector. The guarantee was likely to improve Australian banks' access to offshore wholesale funding markets, the ratings agency said.JPMorgan analyst Brian Johnson said Suncorp stood to be one of the biggest beneficiaries of the Federal Government's guarantee on wholesale funding."As a bank that was facing the greatest pressures in terms of getting access to wholesale funding markets, the initiative clearly provides some breathing room for Suncorp and means that they may not have to shrink their book or sell their bank," Mr Johnson said in a note to clients.Suncorp's A+ rating from Standard & Poor's is a notch lower than the AA rating of Australia's four biggest banks.This leaves Suncorp at a disadvantage in terms of raising fresh funds through offshore wholesale funding markets. Still, it is believed Suncorp has sharply slowed the pace of lending, particularly across business loans. The bank has toughened its criteria as well as limited new loans to existing customers.This has eased pressure from its need to raise about $4.5 billion in long-term funding over fiscal 2009.So far Suncorp has already raised $1 billion.
© 2008 The Age
